Quote:
Originally Posted by Jim in CT
Spence, tell me where this statement is wrong, please...
Corporate income taxes are the cost of corporate income. When the cost of income decreases, the demand for income will increase. Some corporate projects might not make economic sense to undertake at a tax rate of 35%, but would make perfect sense at a tax rate of 20%.
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The front half of your statement doesn't make any sense.
The back half makes some sense but it's more complicated than you state. In capital budgeting the tax rate is just one variable in the calculation. The net return is a factor of investments, anticipated benefits, taxes on profit (income less expenses) as well as the hurdle rate etc...
Dialing the corporate tax rate down isn't going to impact investments as much because if the projects are justified they would typically need to be justified by a wider margin than the difference in tax rates provide.
Small business could be different.
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